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In the next few weeks, Bitcoin is going to begin it’s transition through SegWit and (later) the hard fork to a 2 MB block size. While there’s a lot of technical details to go through, this article will be focusing on another question: how will this transition affect the overall valuation of Bitcoin, Litecoin, Ethereum and the market as a whole?

This article will focus on our predictions* of how the market is going to respond. We focused primarily on three cryptocurrencies: Bitcoin, Litecoin and Ethereum, largely for convienince sake. While every cryptocurrency will be affected by SegWit indirectly we believe the Ethereum (the 2nd largest cryptocurrency) and Litecoin (the most similar cryptocurrency to BTC) will be the most directly impacted.

In Summary, here’s how we think the market might be impacted under several conditions:

Segwit/2MB Succeeds without a Chain Split

Temporary valuation boost for everyone, followed by a continued crash with no structural changes and no new price floor post crash.

Segwit/2MB Succeeds with a Temporary Chain Split

Temporary structural market change, with Bitcoin collectively losing value and major alt-chains (Ethereum and Litecoin) gaining value. After a few months of activity, the market will return more or less back to normal with no long-term impact.

Segwit/2MB Succeeds and there are Multiple Bitcoin Blockchains

Permanent structural market change, with Ethereum and Litecoin gaining significant value (Ethereum likely the new highest value blockchain). Market will have a lower post-crash price floor due to investor confidence being shaken.

However, given the massive crash happening in the market currently, it’s unlikely that even a flawless transition will overcome the price drop. After a short period of relief, Bitcoin will likely continue to fall with the rest of the market.

Rest of the Market

Success for Bitcoin has often meant success for alt-chains. For the last few weeks, the market has tended to rise and fall uniformly, with few exceptions. So if Bitcoin succeeds, the rest of the market will likely get a short boost before being overtaken by the crash.

In this particular scenario, the theoretical price floor the market is heading towards (whatever that might be) will be unaltered.

Case #2: Segwit/2MB Succeeds with a Temporary Chain Split

Bitcoin

In the case of a hiccup in the transition, there is a possibility that there will be two Bitcoin chains that the community will have to decide between. In a scenario like this, it is very likely that the collectivley price of Bitcoin will drop dramatically as the market tries to decide which chain to support.

This scenario would not be too dis-similar to what happened with Ethereum after their hard fork in June of 2016. After part of the mining community left to start Ethereum Classic, the price of Ethereum took a noticeable downturn.

Unlike Ethereum, once a negative price impact is seen (and profits are impacted), the minor chain will be abandoned in favor of the ‘majority’ chain. The reason this might be the case is because as opposed to ETC, which split largely due to ideological issues, the BTC mining community seems more motivated by profits and revenue. If the alt-chain splits and it doesn’t lead to more $$$, the minor chain will panic and BTC Prime will be unified.

This will likely result in a temporarily depressed price for Bitcoin, as it will take a few months for the market to re-settle. However, this is unlikely to damage Bitcoin’s reputation too badly. It is still the most widely accepted cryptocurrency globally and even with a minor chain split, it will be unlikely to sway the public view. As a result, Bitcoin will remain the dominant blockchain by valuation.

Litecoin/Ethereum

When the value of Bitcoin drops, a certain percentage of investors are going to hunt for other opportunities to park their funds. Two of the most obvious blockchains to go for are Ethereum and Litecoin.

Ethereum is considered to be the ‘rival’ of Bitcoin in the blockchain world. It has the second highest valuation by market cap and is being compared in the media as the alternative cryptocurrency people should consider. If Bitcoin drops, this is naturally the place people are going to look only because it’s a safe bet.

More savvy investors would expand a bit further and consider a blockchain like Litecoin. Litecoin has had the reputation of being ‘the silver to Bitcoin’s gold’ and has proportionally grown in value with Bitcoin. The two blockchains are structurally similar and earlier this year Litecoin successfully implemented their own version of SegWit.

During the split, it’s likely these two blockchains will receive some of the valuation drop from Bitcoin. Post split, you’ll see a change in prices, but more than likely the structure of the industry will not change in the long-term. Bitcoin will eventually recover and Ethereum and Litecoin will return to their pre-SegWit positions, baring any additional shocks to the market.

Rest of the Market

The impact on the rest of the market entirely depends on people’s belief that X blockchain is a good substitute for Bitcoin. For blockchains like Ripple, Dash and Monero, it’s very likely that their price will temporarily rise as well. However, more obscure chains might not get as much attention and continue their decent due to the crash.

Ultimately, the impact of the crash in this scenario will be less noticeable, as the volatility caused by Bitcoin will make it hard to find any discernible trends in the short-term. Longer-term, the crash will still prevail and the industry will go towards the natural post-crash floor.

Case #3: Segwit/2MB Succeeds with Permanent Chain Split

Bitcoin

While we have an example of Ethereum successfully breaking into two chains, Bitcoin is a bit different. Ethereum was a relatively unknown blockchain back in mid-2016 and was able to do it’s dirty laundry away from the main stream media. Bitcoin is the poster child of blockchain technology and cryptocurrency.

If you were to ask the average person about cryptocurrency or blockchain, they probably couldn’t tell you what it was. But they’ve very likely heard of Bitcoin.

What this means is that if Bitcoin splits it’s chain and tens of thousands of users have to figure out which chain to ‘support’, it’s going to cause a lot of confusion in the general market. Considering all the alternatives to Bitcoin, it’s likely the value of the market will move to other established blockchains, causing the combined value of the Bitcoins to diminish significantly.

Hard forks are generally a very confusing affair. Have to explain to an average trader how a hard fork works (and why the now have two kinds of BTC) is going to be complicated. If most users are in the position of having to decide between two different chains, they are likely to chose a third option of just selling out and not dealing with it. This won’t affect just Bitcoin, but the entire market as a whole.

Ethereum/Litecoin

In the scenario of Bitcoin splitting chains, Litecoin and Ethereum would probably be the major benefactors of the valuation shift for the reasons listed above. Unlike the previous scenario, it’s very likely that the power dynamic will flip and Bitcoin will no longer be the dominant force in the industry, altering the market structure.

Because of Ethereum’s current valuation at ~$20 Billion (compared to Litecoin’s $2 Billion), it will likely be the most valuable blockchain if Bitcoin splits. Litecoin may gain enough momentum as it is so similar to Bitcoin, but it has to raise in value very fast for this to be possible.

Rest of the Market

While the power structure of the major blockchains will change dramatically, the market as a whole will likely lose value beyond the crash. Because of how visible Bitcoin is, a split in the chain is likely to cause some confusion with the larger investment community and push some people away. Because of this, the price floor of the market will be lower than if the the permanent chain split did not happen.

There are a few major blockchains that may retain some of Bitcoin’s value, but overall the rest of the cryptocurrency market will drop in price due to the relative lack of activity long-term.

Conclusion

Regardless of your stance on Bitcoin, it is important for the image of the blockchain community. It’s the most public blockchain and, for many, is cryptocurrency. A public chain split will likely damage consumer trust and set blockchain back several years.

If Bitcoin can get through unscathed, it likely won’t fix the short-term price due to the crash, but the long-term consistency will help build trust in the public eye.

It was an important cry for help to the Ethereum community, asking the developers to make some updates. However, most people seemed unaware that they can go and make a change themselves with just a few steps. In this video, we give a quick tutorial on how to meaningfully contribute to the Ethereum project using Github.

Recently, we asked a question about the blockchain industry: what is the most meaningful way to compare the largest blockchains and their attributes? Market capitalization is an okay standard, but given the depth and variety of different blockchain technologies, there must be a better way to measure their impacts. This started with our research into individual blockchains (Hivergent Scorecard) and has started to spread to analyzing the industry as a whole.

Starting by researching blockchains on CoinMarketCap, we’ve begun to apply a meaningful, objective criteria for reviewing which blockchains deserve further analysis. Our purpose is to pick a subgroup of blockchains that have launched and made a contribution to the industry in a way that can be analyzed fairly.

Our Criteria

We started with all cryptocurrencies that had a valuation of over $10 million on July 15th, 2017 (date of market capitalization data extract). We picked $10 million dollars as our starting point because we deemed this point as an important threshold in the industry. Blockchains over $10 million have demonstrated an ability to find a user base who interact with their blockchain. In addition, blockchains with a valuation below $10 million are far more likely to be part of a market manipulation scheme or non-sustained boosts in market capitalization.

This resulted in 131 blockchains to be reviewed. To date, we have reviewed 55, and have included our findings in the document. To further limit our list down, we wanted to focus on blockchains that had a particular set of characteristics, including:

Must Be An Infrastructure Token

An infrastructure blockchain is a network that requires it’s own servers (through the form of miners or forgers) to maintain their network. Infrastructure blockchains have a native asset (infrastructure token) that is used to reward these miners/forger. This is in contrast to services tokens, which run on top of an already established blockchain and do not maintain their own servers.

As an example, Ethereum is an infrastructure blockchain, because it’s software is directly supported by servers in the community (which are rewarded with ETH). ETH is an infrastructure token because is the native asset of the Ethereum blockchain. Gnosis is a services token, because it runs on the Ethereum blockchain and does not maintain it’s own mining network. Gnosis is not the native asset of the network, instead deriving value from the smart contracts that Gnosis is able to unlock. The reason we are excluding services tokens is because we believe the market for these tokens is vastly different from traditional blockchain infrastructure and warrants it’s own separate analysis.

Must Have Been Launched to Mainnet for 12 Months

The blockchain must have been running in production (aka on the ‘mainnet’) for a period of 12 months (starting on July 31st, 2017). The reason for this is because we want to analyze blockchains that have had a sufficient amount of time to launch, attract a community of miners and begin working towards their vision of the future.

Analyzing blockchains that have less than 12 months in production would rely too heavily on speculation as opposed to more object measures, which is why they’re excluded from the analysis.

Market Capitalization must have been over $10 million for 6 Month

The market capitalization for the blockchain must have been over $10 million for the previous six months before beginning of the analysis (the cutoff date deemed January 31st, 2017). The reason for this restriction is because we want to focus on blockchains that have found a following in the market.

While not a perfect indicator of use, market capitalization is useful to understand if a cryptocurrency is exchanged beyond a speculative spike in usage. We first wanted to use $10 million as a simple threshold (did the cryptocurrency at one point have a value above $10 million?), but found that too manycryptocurrencies had large, unsustained spikes in valuation. Because of this, we implemented this more rigorous longevity standard.

Out of 55 blockchains analyzed so far, only 16 have been able to pass our standards based on the criteria above:

Early Observations

Out of 55 blockchains reviewed, only 34 (61% of total) qualify as an infrastructure token. This means that 39% of the most valuable cryptocurrencies in the world are service tokens, many of which have yet to launch. In total, these comprise about $2 Billion in market capitalization.

Out of the 34 infrastructure tokens on our list, three have yet to launch onto the ‘mainnet’. The most valuable of these cryptocurrencies, IOTA, is valued at $443 million.

For infrastructure tokens, the most popular year for a new blockchain going on the mainnet was 2016, with 11 blockchains in the top 55 reaching this level. 2015 and 2014 each have 5 mainnet launches, and before 2014, only six blockchains launched remain in the top 55 blockchains by market cap. These include:

Dogecoin (2013)

Nxt (2013)

Bytecoin (2012)

Ripple (2012)

Litecoin (2011)

Bitcoin (2009)

The lowest value cryptocurrency by market cap that is currently accepted into the analysis is ‘GameCredits’. Their platform for creating a payment network for gaming has been released since 2014 and has consistently maintained a valuation of over $10 million since January of 2017.

Ethereum Classic (ETC) warrants an explanation. Ethereum Classic started as a hard fork away from Ethereum after the now infamous DAO hack. While they technically have a shared lineage with the Ethereum blockchain, we considered theirmainnet launch as July 20th, 2016, as this was the day of the DAO hardfork. This is the date that the team behind Ethereum Classic started their vision of what Etheruem needed to become, which for our purposes was a ‘new’ start date for the blockchain. Fortunately, this date allows us to include Ethereum Classic in the analysis, albeit by only a few weeks.

Conclusion

Our goal is to review every blockchain with a market cap over $10 million by later this week. If you want to stay up to date on where this research is going, please sign-up for our newsletter, as that will be the first place we will be making announcement.

If you have any interesting insights you’d like to share, please let us know in the comments.

This is the third edition of the Hivergent Scorecard, where we give you the important highlights on a popular cryptocurrency that you may not know about. If you missed the first two articles on Stellar and NEM, you can check them out here and here. This week, we will be diving into Monero, one of the major blockchains focusing on privacy in transactions.

The Hivergent Scorecard:

Name of the Blockchain: Monero

Year Founded: 2014

Name of Managing Organization: Monero Core Team/Monero Research Lab

Organization Status: Community Driven

Important Founders: Riccardo “fluffypony” Spagni (See full team located here)

Key Partners: Darknet Markets (Unofficial and not Condoned)

Blockchain Most Similar To**: Bytecoin

** This last point is highly subjective, as viewing the blockchain from various perspectives can make it compete or even complement many blockchains in the ecosystem. However, this metric can give you an idea of how other blockchains compare to one another, allowing you to better understand how major cryptocurrencies compare.

The Hivergent Highlights

A Privacy Focused Cryptocurrency for All

Bitcoin was originally called anonymous because Bitcoin addresses don’t have any identifying information associated with a user. The term used today is ‘pseudo-nonomous’, transactions associated with an account are logged forever. If an address gets associated with a person, their entire transaction history can be traced.

Monero started as a project to solve this ‘traceability’ problem. Monero as a blockchain has several major technological innovations that allow for total anonymity in transactions:

The source of transactions on the blockchain are nearly impossible to identify. By using a property known as ‘ring signatures’, it’s not possible to accurately link the source of a transaction to any one address.

Using another innovation called ‘RingCT’, it is not possible to know the amount being sent in a particular transaction.

Using a stealth address, users on the Monero blockchain create a one time address for each transaction, obscuring the sending address in each transaction.

Because of these three features, transactions on the blockchain are nearly impossible to trace, allowing for secure and private transactions for all users.

True Fungibility in Cryptocurrency

When analyzing assets, there is a concept known as fungibility, which is a measure of how interchangeable objects are to one another. For example, the US dollar is a rather fungible form of currency, as one dollar is generally exchangeable from any other dollar in circulation. Other assets, like cars, are not very fungible. One car, which has had one set of owners and circumstances, will have a completely different state than another car, even if the make, model, and year are identical.

For most cryptocurrencies, like Bitcoin or Ethereum, the assets are less fungible then one would suspect. While it’s true that if you buy one BTC from another person, it usually does not matter what transactions happened before it was in your wallet. But because the Bitcoin blockchain is immutable and all transactions are available, this history of your BTC can be analyzed.

Why does this matter? Because some BTC in the ecosystem have been stolen because of hacks and nefarious actions. And those specific BTC can be tracked and marked allowing exchanges like Coinbase and Bittrex to ban their use. If you happen to be in possession of a token that was involved in one of these hacks, your account can be permanently blacklist.

Monero is one of the only cryptocurrencies that provides true fungibility in cryptocurrency as a default feature. Because transaction histories cannot be tracked, every asset is treated the same across the network. This is not dissimilar to how we treat almost every fiat currency in the world, making a strong argument for how cryptocurrencies should be handled as well.

Community Driven Development, for Better or Worse

Unlike the Bitcoin and Ethereum (but similar to NEM), Monero does not have a managing organization. It did not launch with an ICO and does not have any outside funding. It is the tenth largest cryptocurrency in the world despite being bootstrapped. There is a team of developers, known as the Monero Core Team, that is led by a developer named Riccardo Spagni, more commonly known as “fluffypony” online.

Spagni is an important part of the Monero community, largely attributed with helping transform the original Monero codebase, which was buggy and disorderly, into the much cleaner and usable codebase that exists today. This is consistent with other founders of popular blockchains, where one ‘super’ user works to move the entire code base forward through incredible persistence.

Even though the community driven atmosphere works for Monero, it does have its drawbacks. For instance, recently Spagni announced that Monero was coming out with a huge announcement soon and was going to impact what Monero was capable of. Suddenly, the price of Monero spiked in value, speculated to be caused by Spagni’s announced. Soon after, Spagni announced that he had ‘trolled’ the community, largely as a protest against speculative investors in the larger cryptocurrency community. This revelation was a point of significant controversy, as the community debated whether such an action from a significant member of the community was appropriate.

Successor to Bitcoin’s Silk Road

While there are positive uses for a privacy focused blockchain, Monero has gotten another reputation in the industry: being the go-to cryptocurrencies for darknet markets. A darknet market is a ‘secret’ marketplace that can only be accessed via the Tor network, a decentralized network which purposely obfuscates IP addresses, making users untraceable. In 2011, Silk Road, the first such darknet market, was launched and used the Bitcoin network as their means of transacting.

In 2013, after an extensive investigation by the US Government, Silk Road was shut down and many users were prosecuted, in part because of Bitcoin’s immutable ledger, which kept a record of all transactions from a particular account. Once a user was linked to a Bitcoin address, it was easy to prove how the money was being spent. After this take-down, Bitcoin was not considered a safe option for darknet merchants.

Unrelated to this set of events, Monero was developing its privacy focused blockchain and was successful in creating a viable cryptocurrency. Because of this, new darknet markets began adopting Monero as a medium of exchange, as transaction can’t be tracked via the blockchain. While there are undoubtedly positive use cases of wanting to hide transactions (by individuals, businesses and government entities), its fair to say that the reason Monero is rising in value is because of darknet markets.

Why Does Monero Matter?

Despite some of the negative associations due to darknet markets, Monero is trying to solve a radically different problem than most blockchains. Amont the top 25 cryptocurrencies, there is only one other competitor, ByteCoin, that is focusing on improved privacy like Monero.

Technologies that have focused on better privacy have always improved society. Despite its prevalence in darknet markets, Monero provides better privacy for everyone on the network, it is not an optional feature. Whether it’s used for military communication or protecting your financial information online, privacy is an important aspect of operating in today’s world. Because of this, projects like Monero are ultimately going to be beneficial to society in the long run.

More Resources for Further Reading

This guide was not designed to be a technical overview, but a jumping off point into the unique things about Monero. If you have further questions, here are some resources I recommend:

When introducing blockchain technology to people, it’s common to get one of three reactions:

Exuberance/Excitement

Boredom/No Interest

Questioning or Outright Hostility

The first reaction is the most exciting. It’s the type of reaction that leads people to dig deep into the technology and learn more. When somebody new gets excited about blockchain, the industry gets better.

The majority of the time, though, people will be dis-interested. Whether it’s a knowledge barrier, lack or time or a general distrust of new technology, most people will dis-engage.

Then there is the third type of reaction: the person who is objectively against blockchain technology. You’ve probably seen this reaction yourself when talking to a colleague or friend, listing off the dozen different problems with the technology. In a way, they’re almost upset that you’re involved.

The first reaction is great, but many more people who fall into the other groups. As someone involved this industry, isn’t it our job to try to convert as many people as possible? That if someone doesn’t ‘buy in’, it’s our job to change their opinion?

I believe no. In this post, we’ll discuss why getting negative opinions or disinterest is not a failure, and how to think about these discussions instead.

The Innovators and The Others

One of the most important tools used to understand markets is called the ‘Product Adoption Curve’. This curve defines different market groups and when they ‘buy into’ a new technology.

Source: http://smartideastore.com/

Most technologies used on a day to day basis are generally mature and used by a majority of the market. Things like refrigerators, chairs and lights are un-dramatically accepted as good products. They’re not controversial.

Other things, like Artificial Intelligence and Blockchain Technology are at the front, only used by a group called the innovators*. Technologies and products in this group are only used by a small portion of users, often less than ~2% of the population. New technologies can spend years in this part of the market and have no influence on most people’s lives. Every revolutionary technology, from electricity to computing to the internet, fell into this category in the early years.

When going out to the world and talking about blockchain technology, you will interact with people who fit in every bucket of this graph. Most will fall outside of the level of the innovators and have little or no interest in the technology. You may feel compelled to help them understand, because that’s one of the joys of being an innovator in an industry.

Because of this, you’ll get push back, arguments and criticisms. Some argument will be right (have you seen the ICO market?) and some will be unjust. Over a large group, you’ll run into a lot of people who rather say no than yes. Does this mean that you’ve failed in some way, or that the industry is not going to make it. After all, doesn’t it have to grow in order to survive?

What It Takes To Build An Industry

At Hivergent, we connect people to make the blockchain industry stronger. We think a big part of our job is networking new entrepreneurs and developers into this broadening world of blockchain. But there’s a trick: we believe we need to get as many bright minds as possible, but we understand we don’t need everyone. Not by a long shot.

This fits into the Product Adoption Cycle we mentioned above. With new technologies, you’re only going to be able to capture 2% of the total market, probably less. And a thriving, inspiring industry can exist within the confines of that space for many years before having to move onto the larger market.

When electricity was first being introduced to the world, it was only in the homes of the excessively wealthy. The very first personal computers were only bought by geeks, in an age where being a geek was actually a bad thing. The first smart phones were very ugly computer hybrids that were expensive to run and barely sent email.

And yet despite the issues, these industries were able to find a dedicated market of users that allowed it to mature. They were able to survive, despite 90+% of the market not knowing, caring or understanding the technology. Everyone was not required, nor needed to make progress.

Blockchain technology is no different. Bitcoin arose at a time when decentralized currency was all but abandoned by the world. Only a small handful of hackers on the internet kept working on the technology through the literal decades it took to make the technology a reality. It did not take a large following of users for Decentralized Currency to survive. It just need a small number of the right people to set the world ablaze.

On Being Slightly Exclusionary

We’re going to hear a lot of complaints about blockchain technology over the next few years. Not just from trolls on the web, but highly respected members of our communities. Our job is to do our best to inspire people about the technology despite the issues.

But your goal should not be to convince everyone. Instead, your goal is to keep talking and spreading the word until you find someone who is excited about the technology. They should believe that maybe there is a real change and a place for them to make a difference. While arguing with someone who is stubbornly unmovable, you can find the opportunity to convince someone else that there is more to blockchain.

This technology is meant to be shared, but it does not need everyone. So long as we grow and collect the vital few to make the technology better, that is enough. And one day, with enough dedicated souls, someone in this field will find the killer app to convince the world there’s something here. Whatever this killer app might be, it will do more to convince the world than 1000 poignant arguments.

Want To Do More?

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*Innovators, in this particular case, is not hyperbolic term. While there are many people who refer to themselves as innovators as a way to bolster their status, innovators in the case just refers to the ‘first’ group using a new technology. Your passion could be to purchase the latest and greatest releases of Japanese Dating Simulators and be an innovator. It’s just a term.

There’s nothing wrong with wanting to understand how hardware mining works. The problem is that when people want to get deeper into cryptocurrency, the common advice is to ‘start mining’. Whether it’s the belief that you’ll get ‘free’ cryptocurrency, or that mining is the next logical step to being an expert, most beginners are steered towards this sub-discipline.

I believe this is a mistake. Mining as a discipline has a lot of drawbacks and not a ton of upside. Especially for beginners, it’s more frustration than it’s worth and should be avoided in most cases. In this post, I’m going to discuss the issues with mining as the ‘next step’ for aspiring blockchain apprentices.

Issue #1: Mining Cryptocurrency Is Hyper Competitive

“The World Is Flat”. It’s the idea that because of the lowering cost of transportation and communication, competition is increasingly becoming global from the early stages of an industry. No where is this more prevalent than in cryptocurrency.

In 2010, there wasn’t a lot of competition for cryptocurrency mining because it was unknown and kind of weird. Only a handful of Bitcoin mining nodes existed globally (altcoins didn’t exist) and the cryptocurrency didn’t have any verifiable value. So anyone who could find the Bitcoin software and install it had a good chance of getting ‘free’ BTC.

This changed the day that the first Bitcoin exchange, Mt Gox, went live. Overnight, BTC had a value and the profitability of mining could be judged (and it turns out, it was quite profitable). This sparked interest in mining and, rapidly, made earning BTC more difficult.

This started the race for the best hardware mining rigs. GPUs soon outpaced CPU mining, which was then succeeded by hardware boards specifically made for Bitcoin. Today, the only way to be profitable mining BTC is to not only have the latest hardware, but also have cheap electricity. People will go to insane lengths to gain an edge here, as this Tibeting mining facility shows.

If you’re a newcomer in the Bitcoin world, trying to earn the next block has as much chance of success as a Pee Wee Football player walking onto the New England Patriots. The time and effort necessary to be successful is grueling, and only profitable for a small few, even with mining pools and other ways of getting a more even profit distribution. You’re not going to walk away with a few ‘free’ BTC.

Other cryptocurrencies (such as Ethereum) aren’t as competitive as Bitcoin, but are still subject to the same global forces listed above. A relatively unknown cryptocurrency that is profitable today will soon attract miners from other blockchains looking to make a better return. And as the price keeps rising, the incentive for more users to enter will continue to increase. It’s a race to the bottom that will never end and requires serious dedication to come on top.

Issue #2: The World Is Moving To Proof Of Stake

Let’s talk about Ethereum’s roadmap. Since the creation of the Ethereum blockchain, there has been a plan to move to another consensus model called Proof of Stake.

For the uninitiated, Proof of Stake is a consensus model that relies on randomly selecting certain special nodes called ‘forgers’ to create the next block on the blockchain. Forgers do not operate like miners. They don’t get mining rewards, instead getting a certain amount of cryptocurrency on a monthly or annual basis. There are no hash calculations necessary to make this system work.

Vitalik Buterin, the founder of the Ethereum blockchain, has already released code of how Ethereum POS is expected to operate. This transition is expected to be implemented sometime later this year, almost completely removing the need for mining.

This trend is not unique to Ethereum. Blockchains are now frequently released with Proof of Stake (or something similar) as their consensus model. NEM is one such example of this. Cosmos is another.

Proof of Stake is just a more economical and environmentally friendly decision in the long-run. Even new blockchains that utilize Proof of Work, such as IOTA, only use their POW algorithms on a smaller scale, as they can be run on IOT devices. This is a far cry from the Bitcoin mining rigs that exist today.

Mining as a skill will likely be obsolete in the next five years. There may be extenuating circumstances that makes this worth the risk, but for the majority of beginners, it is not.

Issue #3: Learning Mining Doesn’t Help You Learn Blockchain

But, there still might be some merit in mining just to learn more about the technology, you might think. Just like work for a business helps you understand how it operates, perhaps mining gives you better insight into how your favorite cryptocurrency functions.

To an extent, this may be is true. Beyond the basics, though, mining doesn’t tell you much about the blockchain, algorithm or anything important about how the system works.

To illustrate this, let me show you a sampling of the top posts from r/Ethereum over the last week:

If these two sets of posts seem unrelated, that’s because they are. Posts about mining have little to do with the larger Ethereum community and everything to do with how to get the fastest mining set-up possible. It’s a specialization that branches into hardware specific areas, rarely reaching back to the blockchain as a whole.

For beginners, this is a time sink that doesn’t help create a better understanding of the ecosystem as a whole. 10 hours spent understanding the Ethereum codebase will lead to better opportunities than 10 hours spent understanding how to build a faster Ethereum mining node.

Conclusion

There’s nothing wrong with being interested in mining. It’s an important area of blockchain technology and is largely responsible for the blockchains we see today. However, global competition has made it a very un-friendly area for new people to come in an start experimenting. Mining is just too competitive and too specific to be useful in a wide-variety of blockchain subjects.

If you do want to learn more about blockchain with reading that will teach you about the community, why not sign up for our newsletter? In addition to a list of the three best books to get up to speed on blockchain fast, I will send you a weekly list of the most important articles from the blockchain space this week. If you want to avoid hunting through the FUD and the Hype to find the good information, look no further.